It would be counter-productive to make voice, text and data roaming too cheap, Telefonica has argued in response to strict new proposals by a member of the European Parliament.

Telefonica has argued that strict new proposals on data-roaming charges in Europe would be counter-productive.Photo credit: Telefonica

Excessively low retail caps would
make it too unprofitable for new investors to enter the European
mobile market, and stymie the Commission's goal of increasing
competition, Telefonica regulatory chief Robert Mourik told a European Parliament debate on Tuesday.

"Don't prescribe a structural solution if you don't think it will
work in the first place," Mourik said, referring to less stringent proposals put forward by the European Commission. "When we look at the latest
proposals… my impression is you actually think that the structural
solution won't work and you need price caps that are extremely severe.
Those are bare-bone prices. Most [smaller operators] won't be able to
make any money or even break even at any stage. Those price caps are
not really conducive to attracting new investors."

This week Niebler, who is steering the new regulations
through the parliamentary process, debated the changes with operators
and regulators in an Industry Research and Energy Committee. Mourik, who participated in the debate, said the Commission proposal went far enough.

You should make sure the price caps you're setting actually entice new people to come into that market.

– Robert Mourik, Telefonica

"For us the Commission proposal with regard to the price caps is
fine," Mourik said. "You should make sure the price caps you're
setting actually entice new people to come into that market — if
they don't come into the market in the first place, you won't have a
structural solution."

Niebler told the debate on Tuesday: "We need to be very ambitious... The target [is] to ensure that by
2015 we will have a situation where national costs and tariffs are
similar to European tariffs so we won't have a separate roaming tariff
any longer — that's the ultimate goal. Consumer organisations
will agree; providers have a different take."

Kroes's proposals have two main strands — she positioned
them as options before unveiling her plans, but ended up including
both simultaneously. The first is to gradually lower price caps
over the 2012-2015 period the regulations will cover, and the second
is deeper structural change that will let customers choose roaming
deals separately from their domestic tariffs.

The new caps continue a trend that former digital commissioner Viviane
Reding started, while the structural change is intended to promote
real competition in the roaming market, where such competition is
currently very limited.

Roaming charges

Niebler's proposed
amendments (PDF) more or less halve the caps Kroes had originally
suggested. For voice roaming, Niebler would have retail prices end up
at a maximum of 10 euro cents a minute for calls made and 5c for calls
received, rather than 24c for calls made and 10c for calls
received.

Text messages would end up at 5c rather than 10c each. As for
mobile data, maximum retail prices for these would, halfway through
2012, fall to 50c per megabyte rather than 90c. At the last stage of
the regulatory period, on 1 July 2014, retail caps would fall to 20c
per megabyte, not the 50c proposed by Kroes.

These retail caps would also last through to 2017 under Niebler's
amendments, not just 2016 as originally proposed.

Telefonica response

Mourik told Niebler and
other committee members and stakeholders that they "don't want to
limit the retail formulas that operators can come up with too
much".

Now, according to Mourik, Telefonica is "broadly supportive" of Kroes's
original proposals. "We were a bit sceptical at the beginning but
after a lot of soul searching and analysis we think the structural
solution can be made to work," Mourik said.

Mourik's words to some extent echoed those of Kroes herself, who last
month warned — specifically on the issue of data roaming
— that operators must be given "sufficient margins for
competition to develop".

However, when Mourik was asked how much it actually costs operators
to deliver data-roaming services, he said he did not know. "To be
honest with you, there are various data products," he said. "It
depends on technology that you use. But the rates are going in the
right direction."

ZDNet UK revealed
in March that the cost of providing such services is around a penny a
megabyte. At the 10c-per-megabyte final data wholesale rate proposed
by both Kroes and Niebler, and the 20c-per-megabyte retail cap
proposed by Niebler, there are arguably still margins to be made.

Further proposals

Apart from her halved retail caps, Niebler has also proposed
several other changes to Kroes's draft. Several of these would make
the regulations more technologically neutral, increasing the ways in
which the new choose-your-roaming-provider system could work from the
operator side.

Niebler would also remove the possibility of the caps being lifted
ahead of the original 2016 target if average retail prices fall below
75 percent of the mandated maximum.

"The maximum wholesale and retail charges should be removed only
when there is effective competition," she explained in her report.
"Therefore, this decision should be left to the review, which should
be held in 2016 in order to allow sufficient time for competition
based on the structural measures to develop."

Niebler also wants to extend the scope of some parts
of the regulations to citizens travelling outside the EU, not just
within it. Because people travel both within and outside the Union,
and there are no regulations protecting phone users on a global scale,
the situation can deter people from turning on their data services
while on any trip, she said.

"That has an indirect adverse impact on the development of the
internal market for roaming services," Niebler said. "It is therefore
necessary to address this problem by also applying certain
transparency and safeguard measures to roaming services provided
outside the Union."

These safeguards should include forcing operators to give free,
easily-accessible information on charges to customers roaming in any
country, not just in the EU, she said.

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